We never recommend the "usage" of these or any other credit cards unless one has the proven discipline to pay them off "TO ZERO" at the end of each month. However, if there is absolutely, 1. "NO room" left in reducing other expenses, 2. "No way" to change lifestyle, 3. No Options for refinancing in a favorable way, then:
transferring present balances to zero percent credit cards to make pay-offs easier and reduce the effect of high interest rates and fees for the short term is a viable planning option. However, for a great majority of people, this is simply a trap laid out for you and the credit card companies know it. Think about it, why else and how else could they offer the "0% rate?"
The below information should be considered before proceeding to make use of any "0 percent" offers are as follows:
- Most 0% rates are issued only to "very good" credit borrowers. Here is one area where low credit borrowers actually subsidize high credit borrowers. Good credit will pay you in the long term. Low credit will cost you money.
- Most of these offers claim a "0% APR," but actually there is usually an upfront balance transfer fee of 3%. The better offers have a max transfer fee of $50. In our view, such offers are misleading, illegal and not a true "0% APR" as claimed. However, this is typically as low as it gets.
- For credit card management purposes, it is probably best to get the largest credit line possible on each 0% card you can qualify for and transfer as many balances as possible to that card. Then go on to the next card.
- DO NOT USE THIS CARD OR THE CARD FROM WHICH BALANCES WILL BE TRANSFERRED. This KILLS the whole plan and purpose and will send you backwards financially at light speed. Credit cards are like financial cigarrettes. They are similarly target marketed and the largest (most "respected" - can you believe it?) financial institutions in America want us to get hooked. That is their advantage over the consumer. They know our weaknesses. They know it causes an early financial death, but they will still profit plenty along the way. These institutions serve the shareholders, not their customers. Credit cards are a HUGE source of financial services revenue and they feed into many other areas of financial revenues for financial institutions. If you are going to win the financial game, you need to know, understand and live this.
- Probably all these offers are for a limited time. The best tend to be for 15 months, the less favorable (but still good offers) tend to be for 8 months. Plan on making new decisions or rolling these to new cards in 12 months or so. Hopefully all at lower balances at that time.
- At that point, if balances still remain, you will need to roll balances into new offers. Keep in mind the following: 1) Good credit and a perfect payment history are the main things that will ensure your ability NOT to go up in rate and to make such changes a year from now, 2) You will probably NOT be allowed to roll same balances into new cards with same banks. They PROBABLY will tell you, "call us (in the future) and we will let you know if we have a special offer at that time," but at that time, they will PROBABLY tell you "sorry, but now is the time for us to profit on your credit card. Your new rate will be _____."
- Qualifying... Unless you have a high, stable (long-term) income (usually they do not verify income), you may not qualify now or in the future. Plan on needing to find new sources in 12 months. That is another reason why you want to get maximum approval for minimum amount of new credit cards. That leaves the door more open in the future.
- Don't cancel old cards. This is more likely to lower your credit score than to increase it. The reason is that old credit is better for your credit record, than new credit because it shows a longer history of credit management. Again, don't use old cards. Chop them up or put them in water in the freezer, but don't cancel them unless you are concerned about the risk of fraud or identity theft.
Understand and follow the above guidelines prior to calling or accepting any "0 Percent" Credit Card offers.
